Digital Financial Inclusion In Micro, Small and Medium Enterprises: The Case of Developing and Emerging Economies

Abstract

Digital financial inclusion is transforming the way in which micro, small, and medium enterprises (MSMEs) interact with the financial system in modern economies. Enabled by digital tools, businesses are now able to collect and store payments, record transactions, and access credit beyond the reach of traditional banks. This paper examines the relationship between digital financial inclusion and MSME growth by reviewing recent studies that provide evidence on the nature of this link. This analysis focuses on twenty-two empirical studies published between 2020 and 2025. Evidence from China, India, southeast Asia, Middle East and North Africa (MENA) countries and other international samples were put together. Sixteen studies found a direct positive link while four identified positive but conditional relationships between digital financial inclusion and MSME performance, One study found mixed impacts while another revealed indirect disciplining effects through reduced financialisation.  Overall, the most common positive associations were for increased access to finance, sales growth, entrepreneurship, and business continuity while employment and productivity effects were mixed. Reduced financing constraints, transaction costs and digital literacy were common issues. The paper therefore recommends that an integrated capacity-building and financial inclusion approach is critical in promoting MSME growth.